Microsoft to hire 400 Yahoo workers, pay Yahoo $150 million

As part of the recent Microhoo deal, Microsoft will hire 400 Yahoo employees …

As Microsoft takes over search development for Yahoo, at least 400 Yahoo employees will be shifting to Microsoft, and Yahoo will receive $50 million annually for the first three years of the 10-year deal to cover any unexpected costs during the switch to new technology. Transferring 400 workers to Microsoft would cut down Yahoo's current payroll by about three percent. Recently, Microsoft has been hiring former Yahoo executives but it has yet to do an en masse hiring. These details emerged in a regulatory filing with the Securities and Exchange Commission that elaborated on the agreement:

Microsoft will also pay Yahoo! a payment of $50 million annually during the first three (3) years of the Search Agreement. Yahoo! may use these payments to partially cover transition and implementation costs not otherwise covered under the Search Agreement.

Following the Commencement Date, Microsoft will hire not less than 400 Yahoo! employees (the "Transferred Employees") and will offer the Transferred Employees market competitive compensation packages. In addition, Yahoo! and Microsoft will mutually agree on a retention plan to be paid for by Microsoft to assist in retaining the Transferred Employees and an additional 150 Yahoo! employees to be mutually agreed upon between Microsoft and Yahoo! to assist with providing the transition services.

The transition is supposed to begin early next year, assuming that government regulators in the US and Europe approve the companies' proposed Internet search partnership, announced just last week. Even if regulatory approval is gained, however, there are still many ways that the deal could "terminate," according to the filing:

On the fifth anniversary of the Commencement Date, Microsoft will have the option to terminate Yahoo!'s sales exclusivity for premium search advertisers.

Yahoo! may terminate the Search Agreement if the trailing 12-month average of the RPS in the United States of Yahoo! and Microsoft's combined queries falls below a specified percentage of Google Inc.'s ("Google") estimated RPS measured on a comparable basis or if the combined Yahoo! and Microsoft query market share in the United States falls below a specified percentage.

If a Termination Event occurs in the United States, the entire Search Agreement may be terminated. If a Termination Event does not occur in the United States a party's termination right is limited to the specific country or countries in which the event occurs.

In short, after five years the two companies can change who runs "premium sales" and Yahoo can terminate the deal if certain targets aren't meeting surrounding revenue per search, compared to Google's industry-leading rate. Unfortunately, the filing doesn't specify exactly how well Bing would need to perform against Google to justify a termination, or how close Microsoft has to come to Google's revenue per search.